Minutes of the 57th Audit Committee Meeting Published
Overview
The 57th meeting of the Business Accounting Council’s Audit Committee discussed draft revisions to the auditing standard on going concern and Japan’s response to international revisions concerning fraud. The draft sets the going-concern evaluation period at one year after the date the financial statements are approved for publication and adds a separate section to the auditor’s report even when no material uncertainty is identified. On fraud, the committee proposed no revision to the auditing standard, reasoning that Japan’s fraud risk response standards already include procedures similar to those in the revised international standards; the matter will instead be addressed in practical guidance. The committee authorized its chair to make revisions reflecting members’ comments and decided to invite public comments on the draft promptly. The proposed effective date for the revised auditing standards is financial statements for the year ending March 2028.
Key points
- The committee discussed draft revisions that extend the evaluation period for going concern and expand disclosures in the auditor’s report.
- For fraud response, the committee proposed addressing the matter through practical guidance without revising the auditing standards.
- After revisions reflecting members’ comments, the draft will promptly be opened for public comment.
Overview
The 57th meeting of the Business Accounting Council’s Audit Committee was held in a hybrid format, with both in-person and online participation. The secretariat explained the “Draft Revisions to the Auditing Standards (Exposure Draft)” and a comparison of the existing and proposed standards, after which committee members discussed them.
The main topics were Japan’s response to revisions of the international auditing standard on going concern and its response to revisions of the international auditing standards on fraud. Members commented on management’s responsibilities for evaluation and disclosure, the implementation of fraud response procedures, and coordination among relevant parties.
Impact
The committee expressed the view that evaluating more future events and conditions would improve the decision-usefulness of audited financial statements.
Details
Under current practice, auditors consider management’s evaluation and response measures for at least one year from the reporting date. The draft requires evaluation through one year after the date the financial statements are approved for publication. If the applicable accounting standards define that approval date, the definition will apply; otherwise, the auditor will determine the date.
The reporting requirements for cases in which a material uncertainty is identified will remain in place. The draft also adds a separate section when no material uncertainty is identified and proposes that, when management has made a significant judgment, the auditor describe how the auditor considered management’s evaluation.
Because the fraud risk response standards already include procedures similar to those in the revised international standards, the committee proposed leaving the auditing standards unchanged and addressing the matter through practical guidance in line with the intent of the current standards. The committee explained that it plans to invite comments for about one month after the meeting and then proceed toward finalization.